The Most Important System We Have

At present, one of my companies processes about $2.5 million dollars in sales a year. That equates to around 3,500 orders a month that are filled from around 1,000 products that we stock.

You cannot imagine how complex it is to accurately manage an inventory of 1,000 different products, keeping enough of each on the shelf so that you can fill 3,500 orders without many delays but not so much that you have all your cash tied up. This is not a job for spreadsheets and physical counting. Forget about it.

That is why of all the systems we have, I think the most important system is our inventory management. We use a software solution called Finale Inventory which costs me a few thousand dollars a year. However, it does the work of probably three full time employees.

Basically, the process goes like this:

  1. Finale keeps track of the physical location of all products in the warehouse. Scanning a product tells us what row, shelf, and individual place on the shelf it goes.
  2. When shipments are received at the warehouse, the products are scanned and automatically added to the inventory.
  3. As orders come in, they are “picked” by scanning the products in the order. This removes them from the inventory.
  4. When inventory gets too low for a product, Finale lets us know that a reorder is necessary. We set parameters to generate these notifications based on the sales volume of each individual product.

Let me tell you how tight this is. Our warehouse is based in our basement and I don’t even go down there much. My kids handle it all along with one of their friends. My 16-year-old is responsible for most of the management, reordering, receiving, and order processing. It is a process that takes roughly 1 FTE (full time employee) when you combine all their time. Essentially, a few high schoolers working part time manage an inventory of up to a half million dollars with very few problems.

We can accomplish that because of Finale Inventory. They don’t pay me for saying that and there are other inventory management solutions that are probably just as good. However, that is why I consider that system to be our most important one. We could not even begin to function without it.

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